STEPHEN POWER, The Wall Street Journal, January 28, 2009Interior Secretary Ken Salazar indicated Tuesday that the Obama Administration could be open to expanded offshore drilling and is considering doing away with a controversial program that allows oil companies to pay in kind for oil and natural gas taken from public lands.

Salazar inherited a Bush Administration plan that would open tracts off the Atlantic and Pacific coasts where drilling had previously been prohibited. Environmental groups want the Obama administration to re-impose a ban on expanded offshore drilling that President George W. Bush lifted last year.

“We have significant drilling already in many places of the Gulf coast. We have drilling in many places off the Alaska shorelines. There are other places that hold potential for exploration. We’ll develop our guidelines as to how we’re going to look at it. But we’re still at the beginning of an information-gathering process,” he said.

Asked about the Bush administration’s proposal to open certain areas of the Atlantic and Pacific coasts to drilling and whether he saw any opportunities for expanded development of the nation’s offshore areas, Salazar said: “When you look at the whole [outer continental shelf], it’s a huge potential. And it has to be done carefully. We don’t want to ruin the beaches of Florida and the coastlines of other places that are sensitive.”

“On the other hand, there are places where it may be appropriate for us to have reconnaissance and exploration and even development. Those are questions that we are exploring and hopefully over the months ahead we’ll have answers to these questions,” he said.

Salazar left the door open to curtailing the “royalty-in-kind” program, under which the government receives oil or natural gas instead of cash for payments of royalties from companies that lease federal property for oil and gas development, and then sells the product into the marketplace and returns the proceeds to the Treasury. “We’re going to put everything on the table — I think everything needs to be looked at,” Salazar said.

Meanwhile, Salazar said new legislation may be needed to overhaul the scandal-plagued Minerals Management Service, a bureau of Interior that manages the nation’s offshore oil and natural gas reserves.

Salazar said his top priority is to restore confidence in the agency, and in particular the MMS, which was rocked last fall by a report from the department’s inspector general that accused some MMS employees of accepting gifts from and having sex with oil and gas industry representatives whose activities they were supposed to regulate.

Although the Bush administration late last year announced disciplinary action ranging from warnings to termination of more than a half-dozen workers implicated in the report, Salazar said he is mulling “whether additional actions are required.”

Many environmental groups are looking to Salazar to reverse certain policy changes made in the final months of the Bush administration, including new regulations on commercial oil-shale development that the groups say lock in inappropriately low royalty rates for energy firms. Salazar said he and his aides intend to review “all those issues” and that “I expect that there will be changes.”

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